Xcel Energy (NASDAQ:XEL) reported solid third-quarter earnings of $1.23 per share and narrowed its 2023 earnings guidance to $3.32 to $3.37 per share. The company also provided 2024 earnings guidance of $3.50 to $3.60 per share. Xcel Energy updated its infrastructure plan for 2024 to 2028, which now includes $34 billion of needed capital investment, an increase of $4.5 billion from the previous plan.
Key takeaways from the call:
- Xcel Energy narrows 2023 earnings guidance to $3.32 to $3.37 per share and provides 2024 earnings guidance of $3.50 to $3.60 per share.
- The company's updated infrastructure plan for 2024 to 2028 includes $34 billion of needed capital investment, up from the previous plan by $4.5 billion.
- The plan focuses on resiliency investments in transmission and distribution and does not include clean energy generation investments.
- Xcel Energy has filed resource plans in Colorado, Minnesota, and New Mexico, proposing significant renewable energy projects.
- The company has made progress in regulatory proceedings, including rate case settlements in Colorado and New Mexico.
- Xcel Energy has executed contracts for the transferability of production tax credits, lowering the cost of renewable energy projects.
The company's third-quarter earnings of $1.23 per share were driven by lower operating and maintenance expenses and conservation efforts, while higher interest charges and depreciation expenses decreased earnings. Weather-adjusted electric sales increased by 1.1% year-to-date, primarily driven by strong commercial and industrial sales.
In regulatory proceedings, Xcel Energy made progress, including rate case settlements in Colorado and New Mexico. The company plans to file a natural gas rate case for Minnesota and potentially a Colorado natural gas rate case in the first quarter of 2024.
Xcel Energy's five-year base capital plan includes significant investments in renewable projects, resiliency, and transmission infrastructure. The plan aims to achieve a 7.6% annual rate base growth. The company has executed contracts totaling $250 million for production tax credit transferability, which lowers the cost of renewable energy projects.
In terms of future plans, the company discussed launching a Request for Proposal (RFP) in mid-next year for potential generation resources of 5,000 to 10,000 megawatts. They expect to select a project by early to mid-2025. They also discussed their financing plan in Colorado, with a focus on equity and the $10 billion Steel for Fuel 2.0 opportunities.
During the earnings call, executives discussed their strong presence in the market and their ability to identify credits easily. They also mentioned their interest in longer-term transactions and their relationships with Fortune 500 companies in Minnesota. The executives provided details about their clean fuels program, specifically the Hydrogen Hub project, stating that negotiations and engineering processes will take about two years and capital deployment will begin at the end of their five-year plan.
The company also mentioned ongoing wind and solar requests for proposals (RFPs) in Wisconsin and a wind RFP in Minnesota. They expect to file another resource plan and are considering wind repowering as additional investment opportunities. In terms of renewables economics, the company has seen capital cost increases in wind projects, but the Inflation Reduction Act has offset these increases, resulting in affordable energy costs for customers.
An analyst asked about the company's plans for Power Purchase Agreements (PPAs) buy-ins. The company's CFO stated that they currently have no plans for PPA buy-ins or buyouts in their capital plans. However, they are open to exploring opportunities that may arise through the RFP processes and working closely with developers. The CFO mentioned that they have had success in buying out wind farms and repowering them. The company also discussed receiving a $100 million DOE grant for wildfire mitigation and stated that they will continue to seek opportunities for additional funding.
InvestingPro Insights
In light of the recent earnings report and future plans laid out by Xcel Energy, it's worth noting a few key metrics and tips from InvestingPro that may provide additional insight into the company's performance and potential.
InvestingPro Tips highlights that Xcel Energy has been consistently increasing its earnings per share and has raised its dividend for 19 consecutive years, showcasing a strong financial track record. Despite six analysts revising their earnings downwards for the upcoming period, the company remains profitable over the last twelve months as of Q2 2023.
From InvestingPro's real-time data, Xcel Energy has a market capitalization of $32.2 billion and a P/E ratio of 18.55, indicating a relatively high valuation relative to its earnings. The company also demonstrated revenue growth of 8.86% in the last twelve months as of Q2 2023, while its gross profit margin stands at 37.67%.
For a more comprehensive analysis, readers can explore additional tips and data metrics on InvestingPro's Xcel Energy page. This includes over 8 additional InvestingPro Tips and numerous real-time metrics that can provide a more in-depth understanding of the company's financial health and future prospects.
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